Balanced Growth Strategy in India

SUBMITTED TO:

Dr. Eritriya Roy

Assistant Professor, Indian Economy

HNLU, Raipur

SUBMITTED BY:

Abhijeet Audichya

B.A.LL. B(Hons.)

SEMESTER 2, SECTION-A

Submitted On:

15th April, 2021

HIDAYATULLAH NATIONAL LAW UNIVERSITY

Uparwara Post, Naya Raipur-492002(C.G.)

S.NO TOPIC PAGE NO.

1. Introduction 1

2. Objectives of Study 2

3. Scope of Study 2

4. Research Methodology 2

5. Chapter 1- Balanced vs Unbalanced Growth 3

6. Chapter 2- Benefits and Criticism of Balanced Growth 5

7. Chapter 3- Balanced Growth strategy in India 7

8. References 9

Table of Contents
 Introduction

When comparing one period of time to the next, economic growth is described as an increase in
the supply of economic goods and services. It can be expressed in nominal or actual (inflation-
adjusted) terms.

Although alternative metrics are often used, aggregate economic growth is traditionally
calculated in terms of gross national product (GNP) or gross domestic product (GDP).

Economic development can be aided by increases in capital resources, labor force, infrastructure,
and human capital. Physical resources, intellectual resources, labor force, and technology are all
widely used to model development in economics.

Simply put, increasing the number or quality of working-age people, the resources they have at
their disposal, and the recipes they have for combining labor, money, and raw materials would
result in improved economic production.

India's economy is classified as a middle-income emerging market economy. The Indian

economy's long-term growth prospects remain good, thanks to its young population and low
dependency ratio, healthy savings and consumption rates, and rising globalization and inclusion
into the liberal economy.

India's economy and GDP have traditionally been categorized and tracked in three sectors:
agriculture, manufacturing, and services. Crops, horticulture, milk, animal husbandry, and
similar practices are also used in agriculture.

Various industrial sub-sectors make up industry. Construction, tech, IT, technology, and related
economic activities are all included in India's concept of the services sector.

1
OBJECTIVES OF THE STUDY

1. To explore Balanced Growth strategy and compare it with unbalanced growth strategy.

2. To examine the merits and demerits of Balanced growth strategy in a country like India.

3. To analyze the scenario of balanced growth in India.

SCOPE OF THE STUDY

As the project employs secondary data, availability of the accurate and primary data becomes an
impediment to the study. And as the project is non-empirical in nature, first hand data and
experiences are not taken as a part of the study. The pandemic situation and internet connectivity
also come as a serious limitation to the research.

RESEARCH METHODOLOGY:

The project is non-empirical in nature. The project employs secondary sources for fulfilment of
the objectives of the study. The project is descriptive and analytical in nature and various
literatures have been covered from journals, news websites, books, various published reports,
published research works etc.

2
 Chapter 1 – Balanced vs Unbalanced Growth

In this section, we will be discussing the balanced growth of an economy in detail and then
briefly comparing it with the unbalanced growth of an economy.

Balanced Growth- The concept of balanced growth changes over time because it is a gradual
phenomenon. Different researchers have viewed the meaning in various ways. The theory of
balanced growth was first suggested by Fredrick List.

The theory of balanced development, according to Fredrick List, is critical for maintaining a
balance between agriculture, manufacturing, and commerce.

The most widely argued and agreed-upon concept of sustainable development is that different
segments of the economy can emerge concurrently and harmoniously in order to provide ready
demand for their products.

Definitions of Balanced Growth-

1. “Balanced Growth means growth in all kinds of capital stock constant rates,” says P.A
Samuelson.

2. “Balanced Growth leads to maximum employment, a high degree of spending, total growth in
productive capability, and equilibrium,” according to a United Nations publication.

3. Alak Ghosh, “Planning for balanced growth means that all segments of the economy will
increase in the same proportion, resulting in equal growth in demand, investment, and income.”

When production and capital stock rise at the same time, this is referred to as balanced growth in
macroeconomics. This growth path may explain actual interest rate stability in the long run, but
its presence necessitates clear assumptions.

In development economics, balanced growth applies to the expansion of many industries at the
same time and in a structured manner.

3
Now let us briefly differentiate balanced and unbalanced growth in an economy.

Both concepts are based on the Big Push theory, which advocates for increased spending to
break the cycle of poverty. Unbalanced growth means that investments should be made only in
the economy's leading sectors, while balanced growth suggests that all businesses should develop
at the same rate.

Unbalanced development leads to discord, inconsistency, and disequilibrium, while balanced

growth aims toward stability, continuity, and equilibrium. The implementation of economic
development necessitates a substantial financial commitment.

Unbalanced growth, on the other hand, needs less capital because it concentrates on the most
lucrative industries.

Balanced development is a long-term strategy, and all economic industries can only expand over
a limited period of time. Unbalanced growth, on the other hand, is a short-term approach since
only a few key industries will grow rapidly.

From the above statements, one thing that can be certainly concluded is that every economy
(whether it be developed or underdeveloped in present times) has to adopt unbalanced growth
strategy in its initial development time span.

However, in order for an economy to be competitive, profitable, and established over time, it
must employ a balanced growth strategy. This must be achieved in order to pay proper
consideration to all aspects of the economy that have the ability to contribute to the economy in
the long run (whether productive or not at the moment) rather than only in the short term.

4
 Chapter 2- Benefits and Criticism of Balanced Growth

In this section, we will be exploring the advantages and disadvantages of balanced growth
strategy if it is implemented in India for a long run.

Merits

1. Division of labor- More rivalry would allow for more worker differentiation and
specialization, resulting in increased productivity and improved product quality. Import
promotion assists in foreign currency acquisition. One way to foster it is by a well-balanced
planning agenda.

2. Innovation and Specialization- This strategy contributes to the market's growth. The
expansion of the sector has a number of benefits. It helps with specialization, and knowledge
boosts competitiveness. As a result, new developments are received with open arms. Not only
has the quantity of products produced increased, but their quality has improved as well.

3. Less Dependence on External aid- The majority of underdeveloped countries are entirely
dependent on foreign countries, except for simple needs, because they fail to adopt a balanced
strategy. The philosophy of global growth leads to the expansion of the economy and
international economies. It also contributes to the growth of social overheads. As a result,
dependence on other countries is reduced.

4. Lowers down poverty levels of a nation- The Balanced Growth Theory emphasizes
simultaneous investment in both the agriculture and industrial industries. It benefits both
agriculture and manufacturing. The production of all sectors contributes to economic growth.
Prosperity is what brings the poverty loop to an end.

5
 Demerits

1. Shortage of resources- The most serious criticism levelled at this doctrine is that it lacks the
most serious impediment to development in developing countries, namely a lack of all types of
resources.

It is impossible to overestimate the importance of a large-scale infrastructure programme and the

expansion of complementary programmes. However, in the absence of adequate resources,
especially money, entrepreneurs, and decision-makers, this policy does not provide a sufficient
stimulus to spontaneous resource mobilization or investment inducement.

2. Problems related to inflation- Multi-industry investment is encouraged by the sustainable

growth doctrine. As a result, inflation happens when demand increases due to massive
investments in different sectors and supply cannot keep up. As a result, in these inflationary
conditions, economic development fails to yield significant results.

3. Lack of planning- The balanced growth theory is mainly concerned with the private sector,
which does not include planning. As a consequence, it overlooks the importance of preparation
in developing countries, where government strategy, guidance, and cooperation are needed to
ensure sustained investment in all sectors.

4. Beneficial only for Developed economies- The balanced growth theory fits emerging
countries well because they have more money, computers, and entrepreneurs. Underdeveloped
economies are unfit for balanced development due to a lack of basic prerequisites and facilities.

6
 Chapter 3- Balanced Growth strategy in India- Barriers and
Suggestions
Recently, the United States was in the throes of a financial meltdown, therefore the government
began doling out bailout programmes to banks and the financial industry, as well as distributing
funds to ordinary citizens, in an attempt to boost demand and solve the slump.

While demand was being generated, the US government's debt rose by nearly 100%. Several
European countries followed suit. Following suit, Indian policymakers began offering bailout
packages. Between 2004 and 2009, 250 lakh people left self-employment and 220 lakh people
were casual workers, according to the National Sample Survey Organization’s (NSSO) 66th
round study.

Farmers, small business owners, and individuals who used to operate small businesses have now
been seasonal workers or are unemployed as a result of this. It's worth noting that casual labor
earns between Rs 200 and Rs 300 a day, with little or no job security.

We also need to think that agriculture and related operations account for just 15 to 16 percent of
total GDP, despite employing approximately 60% of the population. A social and economic
census study backs up this assertion.

Increased inequality in India not only suggest that the poor's quality of life has remained
unchanged despite economic development, but that they are still impeding future economic
growth. India needs not only more work, but better jobs.

Despite a fast rebound after an extraordinary year, the decline in jobs in some industries is
concerning and requires immediate attention. While the government has concentrated on the
healthcare, finance, agricultural, and insurance industries, the services sector has been
overlooked, despite the fact that it has experienced a significant setback as a result of the
pandemic.

Tourism, hospitality, and the entertainment industry, both of which generate a significant number
of jobs, need special consideration. While the infrastructure incentives announced in the recent
budget may improve tourism in the long run, a 19 percent cut in budgetary allocation and a low
allotment of money for tourism infrastructure growth have been disappointments.

7
While the government's Atmanirbhar Bharat and other post-covid relief packages may be
considered "micro" budgets in and of themselves, they were implemented in reaction to the
pandemic's triggered lockdown. Now is the time for the government to focus on India's long-
term growth and development.

As we brace for a return to normalcy in our economy, aid to crippled industries that can generate
employment for millions can go a long way toward ensuring a balanced recovery.

Now after discussing the barriers to the balanced growth strategy in India, we shall discuss
the ways in which India (like other developed economies) can adopt balanced growth
doctrine. These ways have been discussed below in the form of points.

1. Each sector's growth capacity should be completely realized, but the means by which this is
accomplished and the stages of development will differ.

2. Developing infrastructure and diversifying programmes for the basic and capital goods
markets, as well as other significant sectors.

3. Keeping in mind the supply of similar raw materials, the prospect of developing other sectors,
such as labor-intensive conventional industries, small-scale new industries, agricultural
processing industries, and forest industries, must be thoroughly explored.

4. Public Private Partnerships (PPP) have the potential to help India's agricultural sector adopt
cutting-edge technology and methods. Agriculture will be transformed by IT and biotech, which
will increase yield and demand volumes. Meanwhile, biotechnology can provide farmers with
tools for cultivating high-yield crops, pest management, and other tasks.

5. If PPP ventures aim at assisting farmers in connecting with their markets and financial
institutions for micro-funding, they have the potential to transform the rural economy
dramatically.

To conclude, if these steps are adopted by the Indian government and the private sector, India
can achieve its target of Balanced growth in the long run. There has to be equitable sharing of
capital, resources and human labor among the major 3 sectors of the Indian Economy-
Agriculture, Industry and Service sector.

8
 References

 Theory of Balance Growth: Concept, Definition and Basis. Economics Discussion.

Retrieved 3 April 2021, from https://www.economicsdiscussion.net/theories/theory-of-
balance-growth-concept-definition-and-basis/4618.

 India should focus on job creation for balanced growth. mint. (2021). Retrieved 27
March 2021, from https://www.livemint.com/opinion/online-views/india-should-focus-
on-job-creation-for-balanced-growth-11614271094416.html.

 Balanced Growth Theory (With Diagram). Economics Discussion. Retrieved 2 April

2021, from https://www.economicsdiscussion.net/theories/balanced-growth-theory-with-
diagram/4614.

 India needs balanced growth, skills and smaller communities to fulfill the dreams of
young. The Economic Times. Retrieved 1 April 2021, from
https://economictimes.indiatimes.com/india-needs-balanced-growth-skills-and-smaller-
communities-to-fulfill-the-dreams-of-young/articleshow/31914144.cms?from=mdr.